Question
Forecast Ideko's free cash flow, assuming Ideko's market share will increase by 0.60 percent per year; investment, financing, and depreciation will be adjusted accordingly; and
Forecast Ideko's free cash flow, assuming Ideko's market share will increase by 0.60 percent per year; investment, financing, and depreciation will be adjusted accordingly; and the projected improvements in working capital do not occur (that is, the numbers in the table remain at their 2005 levels through 2010, and Ideko's working capital requirements through 2010 will be as shown). Ideko's production plant will require an expansion in 2010 (when production volume will exceed the current level by 50%), and the cost of this expansion will be $15.4 million. This amount will be borrowed from a financial institution at interest rate of 6.8%. The new projected capital investments are shown, while the income statement is provided (Assume an income tax rate of 35%.)
Calculate Ideko's free cash flow through 2010 below:(Round to the nearest $ 000.)
Free Cash Flow ($ 000) | 2006, 2007, 2008, 2009, 2010 |
Net Income | |
Plus: After-tax Interest Expense | |
Unlevered Net Income | |
Plus: Depreciation | |
Less: Increase in NWC | |
Less: Capital Expenditures | |
Free Cash Flow of Firm | |
Plus: Net Borrowing | |
Less: After-tax Interest Expense | |
Free Cash Flow to Equity |
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